Introduction

In many developing countries poor people have combined together to organise saving schemes in order to increase their financial security. Saving schemes may be used as a source of credit for the participants, who take turns to receive loans.

Many donor agencies fund credit schemes in developing countries. Donors are attracted by the idea that their funds will be used many times over and benefit many different borrowers.

There are a range of views on the usefulness and appropriateness of savings and credit schemes (see Further Reading). Much depends on the aim of the scheme. If poverty reduction is the goal, the scheme will need to ensure it responds to the savings and credit needs of very poor people. These may be more to do with flexible savings accounts and provision of loans to meet abnormal expenditure (such as payment for health care or other family expenses) than for credit to set up small income-generating ventures.

Much also depends on the context, including existing formal and informal savings and credit institutions such as banks, rotating savings and credit associations (ROSCAs), and private money-lenders. It is important for intervention agencies to understand how existing institutions are (or are not) useful to poor people and to design any scheme accordingly. The macroeconomic context is important in influencing the financial sustainability of schemes (see Chapter 8: Sustainability). However, institutional sustainability depends on how well staff and people using the scheme work together towards common goals.

Efficient administration and accurate accounting records are vital for any scheme to be successful. A savings and credit scheme needs accurate accounts in order to:

· record the history of the financial activities of the scheme;

· provide information for the leaders of the project to help them to manage its activities;

· maintain confidence in the scheme: donors and savers need to know that their funds are in safe hands; borrowers need to know that their loan is being dealt with fairly.

Accounting is the process of recording, reconciling, sorting, and summarising individual transactions in order to present a picture of the financial health of an enterprise. The purpose of this guide is to explain the principles and tasks required to carry out all these activities for a savings and credit scheme. In many countries there will be a government requirement for organizations to maintain proper accounting records.

It is hoped that the guide will be useful to a number of audiences:

· leaders and finance officers of credit and savings schemes, as the basis for a procedures manual;

· project funders to provide a benchmark for good practice;

· facilitators of financial training workshops, as a training resource;

· the general reader, as an introduction to basic accounting.